Mortgages Blog

Will home prices return to 2007?

If you bought a home during the real estate bubble and are waiting to sell when you've recouped your losses, you may be moving straight into the old-folks home, especially if you live in the Sun Belt.

A Fiserv study predicts that home prices won't hit the national average peak price of $238,000 again until 2023. Nationwide, prices will improve an average of 3.7 percent a year for the next five years, according to Fiserv. If it continues at that rate, it will be another six years until home prices catch up to the highs of 2007.

Home prices sank by a third from the beginning of 2007 to the beginning of this year. The Standard & Poor's 500/Case-Shiller index of 20 metro areas shows that home prices rose overall by 1.2 percent in July from a year earlier, proving that we're in the very early stages of a recovery.

Fiserv points to several markets that could take longer than a decade to recover. They include some states in the Sun Belt that were hardest-hit by the real estate bust: Florida, Nevada, California and Arizona. California, for example, is predicted to grow by 4.4 percent over the next five years -- a little faster than the national average -- but prices plummeted in that state by more than 45 percent since 2007.

A few markets in the Fiserv study are already slightly above their peak prices, because they never soared as high as they did in states where real estate speculation was booming. South Dakota, Texas and West Virginia are enjoying prices just above 2007 values, while North Dakota's prices are already more than 17 percent higher.

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8 Comments

comon man

September 28, 2012 at 7:06 pm

I think before any of this mess is fully straight, the banks need to act like banks.If you have lived long enough you can see how the banks today are preditory sharks.

The industry needs to clean its self up.Another problem is people started using there houses like credit cards.The banks took our bail out tax money and still thumb their collective noses at the common man as if they are the master and we are the slave here. I agree we need the president(Obama) to do the right thing but i'm scared when i guy like romeny is running for president and wont tell you his plan.How can a man like that even relate to the common man?.We are now paying for all ther money people robbed out of the housing market in this ugly industry.

Tazman

September 28, 2012 at 4:06 pm

100% LTV, no-documentation and interest-only loans were a symptom of the Clinton administration's push to "put more people in their own home." Barney Frank and the head of FannieMae at the time came up with their scheme to make qualifying to buy a home easier. The result, investors took advantage of the relaxed standards as well and demand went way, way up.

Now, we've returned to traditional underwriting requirements, but we need a different President who is pro-business instead of anti-capitalistic to get the economy going again. This would increase personal incomes which would increase confidence and the housing prices would pick quit dropping.

Pretty darn simple, really.

Ciscoray

September 28, 2012 at 1:51 pm

I tend to agree with Bunka. I remember vividly thinking when is this going to settle? How high are these prices going to go becaust they can't go on forever. I live in a very depressed housing area, all because of the speculative greed of people cashing in. Eventually the situation will settle and prices will rise but I hope in line with the rest of the economy. Our country does not need to go through these boom and bust periods. There has to be a better way.

Zippy Pinhead

September 28, 2012 at 1:36 pm

While the prices of housing were inflated, they were not inflated to the extent some of you think. The first poster has a very good point in that the cost and price of building a new home should be about the same or slightly more than owning an existing home. That is now way out of balance in that an existing home is priced much lower than it costs to build a new home. Also there is a huge backlog of people who want/need a home relative to the availability of homes since we haven't been building new homes for 5 years. This bodes very well for steady and increasing housing values. And don't forget it was the greed of Wall Street and the buying and selling of mortgage packages that was the root of the collapse.

mortgagelady

September 28, 2012 at 12:29 pm

The housing prices are unreasonably low compared to the actual cost of new home construction. Until the price of an existing home is somewhat close to the cost of a new home, people won't buy new homes which will keep the economy from fully recovering. The first thing you'll learn in business school is there is nothing more important to the economy than housing starts. The problem is that the pendulum has swung to far the other way.

Bunka

September 28, 2012 at 9:51 am

It makes no sense. The housing bubble was caused by inflated false prices and irresponsible lending and buying. Reality steppd in and prices fell to a more realistic level. Thats where we are now. Why would we want to go back to fantasy land? The last thing we should do is measure our economy on rising home prices. Thats a measure of near economic collapse. We have been there, why would we want to go back?

radklman

September 28, 2012 at 1:23 am

The house prices were way inflated out of sight. They should never have risen to the level they did.

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